Identifying and Prioritizing Business Intelligence 2 nd Meeting Course Name: Business Intelligence Year: 2009

Bina Nusantara University 3 Source of this Material (1). Williams, Steve & Williams, Nancy (2007). The Profit Impact of Business Intelligence. Chapter 2

Bina Nusantara University 4 BI Opportunity Analysis: Overview Figure 2-1 The principal methods of BI opportunity analysis are to identify and prioritize opportunities to use business information, business analyses, and structured decisions. Figure 2-1 shows an overview of the BI opportunity analysis approach. As indicated by the arrows cascading down the left side of figure 2-1.

Bina Nusantara University 5 Case Study: McCormick Opportunity Analysis McCormick is a $2 billion manufacturer of commonly known food an beverage ingredients. Bases solely on publicly available information, this section shows step by step how McCormick might analyze its BI opportunities and applied that analysis to improve its profits and operating effectiveness. McCormick sells ingredients to food and beverage processors, which in turn sell them to food and beverage retailers. The food industry is a mature, fragmented, international industry that is undergoing substantial structural changes typical of industry evolution. Changes in the food and beverage retailing industry affect the food and beverage processing industry (McCormick’s customers), and the resulting changes to the food and beverage processing industry affect McCormick’s business. From a BI strategy perspective, we are most interested in changes that affect McCormick’s customers and how they make money. The nature and extent of those changes may create opportunities for McCormick to use BI to its strategic and competitive advantage.

Bina Nusantara University 6 Evolution of McCormick’s Relevant Industries Three key industries were relevant to McCormick’s BI planning: the food and beverage retail industry, the food and beverage processing industry, and the food and beverage ingredients industry. The food and beverage retail industry has historically been fragmented and regional. By 1999, however, it had become increasingly concentrated and global.. The industry is a mature, consolidating, slow-growth industry with intense competition based on price. The food and beverage processing industry is affected by trends at the retail level. The McCormick company’s primary interest is in indentifying the major trends and their likely impact on the bases of competition in its ingredients businesses. This will suggest potential areas where McCormick can leverage BI. The Food and Beverage ingredients industry is similar in structure to that of the related downstream industries: mature, slow growth, fragmented, and increasingly global. When planning for BI, pay careful attention to the strategic business drivers in your industry and to how the organization competes in the marketplace. These insights will provide vital guidance in helping you identify high-value BI opportunities.

Bina Nusantara University 7 Summary of Food Industry Drivers and Trends Figure 2-2 Growth and profitability could be enhanced by effective use of BI that supports those objectives. BI capabilities that promote top-caliber customer service and make it easy to do business with McCormick are also important. A summary of food industry drivers and trends is shown in Figure 2-2.

Business Drivers  Consolidation  Wal-Mart Factor  Increased Pricing Pressures  Slow Growth  Global Expansion  IT as an Competitive Weapon McCormick Business Strategies, Goals, and Objective  Retain/increase revenue and market share trough developing a broad lien of differentiated product and services. Bina Nusantara University 8 Application of the Business Intelligence Opportunity Analysis Framework at McCormick  Reduce costs and improve service through strengthening supply chain collaboration and improving sales forecasting.  Improve profits by utilizing customer segmentation approaches to indentify the most profitable customers and retain these customers by providing high-quality, differentiated service and support.  Preserve margins by refining pricing strategy to determine the potential short-term and long-term cost/benefit of adjusting prices for different customers and segment; make pricing decisions based on cost/benefit analysis.

Bina Nusantara University 9 Application of the Business Intelligence Opportunity Analysis Framework at McCormick (cont…) McCormick Business-Driven BI Value Creation Opport. Based on McCormick’s industry environment, business drivers, strategies, goals, and business design, the following BI Opportunities can be indentified. Each would help McCormick improve profit and performance.  Product Development BI  Customer Service BI  SCM BI  Manufacturing BI  Financial Planning & Control BI McCormick Business Design  Value Disciplines o Customer Knowledge o Consumer-Focused Product Development o Leveraged IT o Continuous Process Improvement o Niche Focus  Core Business processes o Product Development o Customer Service o Supply Chain Management (SCM) o Manufacturing o Financial Planning and Control

Bina Nusantara University 10 Application of the Business Intelligence Opportunity Analysis Framework at McCormick (cont…) Figure 2-3 Figure 2-3 shows the continuation of the BI opportunity analysis from the point of having identified opportunities of business-driven BI value creation to the point of having used a portfolio of BI Opportunities to create a BI opportunity map. The BI opportunity map is a conceptual framework aimed at prioritizing BI opportunities based on what amounts to a risk-reward tradeoff.

Bina Nusantara University 11 Application of the Business Intelligence Opportunity Analysis Framework at McCormick (cont…) Figure 2-4Figure 2-5 Figure 2-4 The Initial BI opportunity map for McCormick. Business and IT leaders and managers can use the initial BI opportunity map as the starting point for discussions addressing the underlying assumptions of the initial project placements, and then they can potentially adjust those placements, as illustrated by figure 2-5.

The BI opportunity analysis framework encompasses a mix of analyses and processes: some are relatively straightforward, and others are more art that science. It is important to identify some key practical considerations that affect the cost and quality of the BI opportunity analysis. Art Versus Science in BI Opportunity Analysis  The process of indentifying how BI can be used within core processes to impact profit is where art comes into play.  The process of indentifying business-driven BI value creation opportunities requires knowledge of a company’s core business processes and knowledge of how BI has been used in different contexts to improve profits.  Numerous generic frameworks can stimulate thinking about how BI can improve the results at your company. There are enterprise management frameworks, functional management frameworks, business process management frameworks, value chain frameworks, and so forth. The art, lies in picking suitable frameworks to fit the scope of the BI Opportunity analysis and in bringing the right business and IT leaders and managers into conversation. Bina Nusantara University 12 BI Opportunity Analysis: Practical Considerations

Bina Nusantara University 13 BI Opportunity Analysis: Practical Considerations (cont..)

Bina Nusantara University 14 BI Opportunity Analysis: Practical Considerations (cont..) Quality of BI Opportunity Analysis  A key element of business-centric BI methods is the BI opportunity analysis and the creation of the BI opportunity map.  To score potential BI opportunities effectively on the business impact scale, the BI opportunity analysis team must rigorously examine the business value capture mechanism for each identified opportunity.  Effectively engaging business executives and managers so that the quality of the BI opportunity analysis and the BI opportunity map is good enough to justify multi-million dollar investment decisions. Risk-Reward Tradeoffs and The BI Opportunity Map  The BI opportunity map is a tool for promoting informed discussion of the risks and rewards associated within given BI opportunities.  The business risks and the technical risks associated with the proposed BI investment on the BI opportunity map must be evaluated.  BI readiness assessment as a tool for identifying key BI risks of a given BI investment and/or a portfolio of BI investment.

Bina Nusantara University 15 BI Opportunity Analysis: Practical Considerations (cont..)  The Critical prerequisites for successfully leveraging BI investment are as follows: o Strategic Alignment o Business and IT Partnership o Continuous Process Improvement Culture o Culture that Supports The Use of Information and Analytical Tools o Decisions Process Engineering Culture o BI and DW Technical Readiness o BI Portfolio Management

End of Slide Bina Nusantara University 16 “… not many executives are information-literate. They know how to get data. But most still have to learn how to use data. Few executives yet know how to ask: What information do I need to do my job? When do I need it? In what form? And from whom should I be getting it? Fewer still ask: What new tasks can I tackle now that I get all these data? Which old tasks should I abandon? Which tasks should I do differently? Practically no one asks ‘What information do I owe? To whom? When? In What Form?’” -Peter F. Drucker, from “Be Data-Literate: Know What to Know”